Crude trades near one-week high as stockpiles seen falling

Unrest in Egypt another concern

West Texas Intermediate traded near the highest level in more than a week on speculation U.S. crude stockpiles shrank for the first time in a month, signaling increased demand in the world’s largest oil consumer.

Futures were little changed in New York after rising 1.5 percent yesterday amid signs of U.S. economic growth and concern that unrest in Egypt may spread and disrupt Middle East oil supplies. Crude inventories probably fell by 2.63 million barrels last week, a Bloomberg News survey showed before a government report tomorrow. The American Petroleum Institute is scheduled to release separate supply data today.

“It does seem to be a demand-side response from the market,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney who predicts traders may sell WTI contracts at about $98.50 a barrel. “We’re on alert for a shift to the downside move but given that this is demand-driven and there is potential for supply disruption it’s not impossible this time to see oil go through the top of the range.”

WTI for August delivery was at $97.89 a barrel, down 10 cents, in electronic trading on the New York Mercantile Exchange at 11:55 a.m. Sydney time. The volume of all futures traded was 57 percent below the 100-day average. The contract climbed $1.43 to $97.99 yesterday, the highest close since June 19.

Brent for August settlement declined 2 cents to $102.98 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $5.09 to WTI. The spread was $5.01 yesterday, the narrowest based on closing prices since Jan. 4, 2011. It slid below $5 in intraday trading.

Goldman Bet

Goldman Sachs Group Inc. has forecast since February 2012 that the spread would shrink. The bank reiterated in May this year that it would narrow to $5 in the third quarter as new pipeline capacity to move oil out of Cushing expands. The oil- storage hub in Oklahoma is the delivery point for WTI contracts traded in New York.

U.S. gasoline stockpiles probably rose by 600,000 barrels in the week ended June 28, according to the median estimate of 10 analysts surveyed by Bloomberg before tomorrow’s data from the Energy Information Administration. Distillate inventories, including heating oiland diesel, increased by 1 million barrels, the survey shows.

The industry-funded API in Washington collects supply information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.

Manufacturing Expansion

U.S. factory output rebounded in June as orders picked up. The Institute for Supply Management’s manufacturing index climbed to a three-month high of 50.9 in June from 49 in May, the Tempe, Arizona-based group said yesterday. A reading of 50 is the dividing line between expansion and contraction.

The U.S. accounted for 21 percent of global oil demand last year, according to BP Plc’s Statistical Review of World Energy.

Egypt’s army yesterday gave President Mohamed Mursi 48 hours to respond to the demands of protesters and end a political impasse. The armed forces said the deadline was a “last chance” for everyone and that it would impose its own plans for the future if demands weren’t met. Hours later, it downplayed talk of a military coup, saying it only wants to push for a quick resolution to the current crisis.

Brent’s advance may stall because of technical resistance, according to data compiled by Bloomberg. Futures have traded higher than the 50-day moving average the past three days without settling above it. This indicator is at about $103.25 a barrel today. Investors typically sell contracts when prices fail to breach chart-resistance levels.